Business value comes down to more than just analysing profit margins and revenue; intangible assets within a business should also be considered to gain a full overview of a business’ sale value.
Intangible assets, such as trademarks, patents, brand recognition, business methodologies and copyrights still contribute to value in a business. Many of these aren’t necessarily directly linked to generating revenue, but the perception of value isn’t always in monetary terms, as they still play a significant role in brand positioning and growth.
Valuing Intangible Assets
When calculating the value of intangible assets, it can be incredibly difficult to apportion the correct value to each factor, which is why it’s recommended to seek professional advice from a business analyst or advisor. They will provide an objective view of your business, making them better equipped to place accurate values on intangible assets. This is particularly useful when companies want to increase their value in the market or are preparing for an exit.
A business analyst will analyse your business to include intangible assets and establish the true value of your business beyond revenue generation. These may include:
- Patents that can give a business control over a specific design or product
- Copyrights for sole rights to sell, design or manufacture services or protect original work
- Trademarks that refer to any name, mark or symbol used by a company to differentiate them in the market
They can also include unique business policies, trade secrets, recipes, patterns and designs, which are kept secret from consumers and competitors to set them apart in their niche. The concept of intangible assets also extends to employees, who possess valuable skills, training and knowledge that are essential to running a successful business.
These factors all work to add value, with the level of value depending on how developed each area is. Once all intangible assets have been identified, business operators should regularly monitor their position to continually improve their value and improve business growth.
Don’t Underestimate the Power of Intangible Assets
Understanding intangible assets in your business will help to create an effective business strategy to ensure efficient operations and growth for the future.
It’s important to look outside of your business operations and analyse the external factors, which can also affect sale value. Many businesses forget to consider customers as intangible assets. It may seem like an obvious point, but customers are incredibly important to a business and should be analysed and categorised by their buying characteristics, so businesses can effectively calculate that value that they add.
Consumers, also have a greater effect on brand reputation too; which is another important intangible asset. By understanding consumer trends and realising their value, you will in turn increase the value of your brand reputation, quality perception and create customer loyalty.
By realising and managing intangible assets, businesses can further establish themselves in the marketplace and increase customer base, brand perception and business profits, making the business a more attractive prospect for future investors or potential buyers.